CAVA to Post Q1 Earnings: Time to Buy, Sell or Hold the Stock?

Core Viewpoint - CAVA Group, Inc. is set to report its first-quarter 2025 results, with expectations of earnings per share (EPS) growth and significant revenue increase compared to the previous year [1][4]. Earnings Estimates - The Zacks Consensus Estimate for CAVA's first-quarter EPS is 14 cents, reflecting a 16.7% increase from 12 cents in the same quarter last year [1]. - The consensus revenue estimate for the first quarter is $330.6 million, indicating a 27.7% growth from the prior year's figure [4]. Earnings Surprise History - CAVA has a history of earnings surprises, exceeding the Zacks Consensus Estimate in three of the last four quarters, with an average surprise of 62.6% [4][6]. Factors Influencing Q1 Results - The company's first-quarter performance is expected to benefit from strong traffic growth, strategic expansion, and enhancements in digital and in-restaurant experiences [8]. - Management anticipates that same-restaurant sales growth will peak in the first quarter, aligning with a full-year guidance of 6-8% growth [9]. Loyalty Program and Menu Innovation - CAVA's loyalty program has significantly boosted customer engagement and sales participation, particularly among lower-frequency users [10]. - The company is focusing on menu innovation, with seasonal items and premium offerings generating excitement and increasing check averages [11]. Cost Pressures - CAVA's performance may face challenges from elevated input costs, particularly due to higher food and packaging expenses, and increased labor costs [12][18]. Stock Performance and Valuation - CAVA shares have declined by 23.9% over the past three months, underperforming the broader restaurant industry [13]. - The stock is currently trading at a forward price-to-sales (P/S) multiple of 8.96X, significantly above the industry average of 4.07X [16]. Investment Considerations - CAVA is positioned to capitalize on the growing consumer interest in health-oriented dining and Mediterranean cuisine, with ongoing investments in restaurant growth and digital capabilities [17]. - However, challenges from rising costs and elevated general and administrative expenses may limit profitability and operating leverage [18].